Question

CanaCo showed the following equity on its December 31, 2014, balance sheet:
Contributed capital
Preferred shares, $2 non-cumulative
Authorized: 50,000
Issued and outstanding: 0.............................................................................. $ -0-
Common shares
Authorized: Unlimited
Issued and outstanding: 50,000.............................................................. 6,800,000
Total contributed capital............................................................................. $ 6,800,000
Retained earnings ....................................................................................... 3,800,000
Total equity .................................................................................................... $10,600,000

The shareholders of CanaCo expressed concerns to the board of directors at the recent annual meeting that the market price of their shares has not changed significantly over the past 18 months, yet the company is very profitable. Net income for each of the past three years has been $1,800,000, $2,300,000, and $3,500,000, respectively. Cash dividends were paid in each of these years equal to 50% of net income.

Required
Using the elements of critical thinking described on the inside front cover, comment.



$1.99
Sales0
Views102
Comments0
  • CreatedJanuary 08, 2015
  • Files Included
Post your question
5000